July 02, 2004

The Employment Situation: Not the Lehrer News Hour

Ah. I won't be on the Lehrer News Hour talking about employment today. So I won't have the opportunity to use my talking points:

BRAD DELONG'S TALKING POINTS: EMPLOYMENT: JULY 2, 2004

  • We do have bad employment news this morning: only an addition of 112,000 payroll jobs comparing the June payroll survey to the May survey--we were expecting 250,000, and hoping for even more.

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  • Nevertheless, the employment news is not very bad. The 140,000-job shorfall relative to expectations is only 0.1% of American employment. If the American economy is an ocean liner, this is only a single swell. And taking the past six months as a whole there is evidence that the employment situation is getting better--or at least that it has stopped getting worse.

  • The right way to look at this, of course, is in its bigger context. And in the bigger context the employment situation right now is lousy. Relative to the peak of the boom, and taking account of the growing adult population, we would have to have 5 million more jobs now than we do to have the same degree labor market. Now that's too ambitious a goal--booms like 1999-2000 come along once in a generation. But we are still some 3 to 3.5 million jobs short of where we would like and could reasonably hope to be, 3 to 3.5 million jobs short of full employment.

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  • Is George W. Bush responsible for the fact that the employment situation is lousy? No. The economy is an ocean liner, but the president is not its captain. Presidents influence the economy. They don't control it.

  • But are he and his administration responsible for the fact that the employment situation is as lousy as it is? Yes. He sold his tax cuts as employment-generating stimulus programs, while in fact they got only about half as much employment bang for the deficit buck as a reasonable program would have. Think of it this way: Suppose your insurance agent tells you you ought to get homeowner's insurance. You give your insurance agent $4,000 to buy homeowner's insurance. You then have a small fire. And your insurance agent then tells you that you're only getting half of the damage covered--that he only used half the money to buy insurance, and spent the rest buying his friends large flat-screen TVs. That's the situation were in: sold as jobs programs, the Bush tax cuts got us only about half as much insurance against a lousy labor market as a real job-promoting stimulus that cost the same in deficit terms would have generated.

    <
  • Thus when the Bush administration says that without the Bush tax cuts employment would be 1.4 million lower, they are probably right. But what they are not saying is that employment would be another 1.4 million higher had Bush administration fiscal policy been designed with its primary focus on boosting employment rather than providing tax cuts for the $200,000+ a year crowd.

  • The lousy employment situation has consequences for working and middle-class incomes as well: wages and salaries have been nearly stagnant since 2000--a very disappointing thing to see, especially as rapid productivity growth means there is lots of headroom for broad-based real wage and income gains.

Posted by DeLong at July 2, 2004 10:20 AM | TrackBack | | Other weblogs commenting on this post
Comments

Wages are stagnant? Econopundit seems to suggest that none of this is true. Someone please advise.


Econopundit:
"I don't have time to link to the work right now, but loyal EconoPunditistas will remember we found substantial labor supply variations linked to the tax cut's effect on real wages."

http://www.econopundit.com/archive/2004_07_01_econopundit_archive.html#108876860437052346

Posted by: Abhishiktananda on July 2, 2004 10:52 AM

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Headroom! Sounds so benign. Indeed that headroom is the point of these policies not an unfortunate byproduct. This reflects the fact that capital is favored over labor. Lords and Serfs. So the lords and ladies need more servants. Big fucking deal.

Posted by: SW on July 2, 2004 10:53 AM

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Headroom! Sounds so benign. Indeed that headroom is the point of these policies not an unfortunate byproduct. This reflects the fact that capital is favored over labor. Lords and Serfs. So the lords and ladies need more servants. Big fucking deal.

Posted by: SW on July 2, 2004 10:55 AM

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Warning, I'm not an economist. But I do have a good mathematics/statistics background.

Why is it proper to measure "relative to the peak of the boom" when judging that the bigger context of the employment situation is lousy?

Maybe I have a bad layman's impression of the economic world, but the understanding I have of the peak of the boom is that it was largely deflated by factors relating to the deflation of the tech-stock boom which most people think was wrongly over-valued. If the peak of the boom was due to floating on an unsupportable bubble, why would you use that number to judge employment statistics now? Aren't we still far below what economists 15 years ago thought of us the minimum unemployment levels.

Posted by: Sebastian Holsclaw on July 2, 2004 11:02 AM

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Sebastian,

You are right about the some-time-back assumptions regarding the unemployment rate, but a couple of things need to be kept in mind. There was a rather comical (in retrospect) drift in assumptions regarding the full-employment rate of unemployment as the jobless rate fell in tandem with inflation through the 1980s and 1990s. So if one wants to engage in analysis that links the jobless rate to the inflation rate, one should at least start with recent performance. The other thing is that, as Brad points out on occassion, the labor market participation rate is extremely influential in determining the jobless rate, so that big swings in labor market participation can mean that very different labor market conditions can share similar jobless rates.

In thinking about the bubble's impact on the labor market (or how to see past the bubble's impact), a crude first step is to eyeball a trend in employment growth over the long haul and extent it past the bubble years to now. When I do that, it is clear that the late 1990s were extraordinary, but also that employment of late has been below where historic growth patterns would leave it, even correcting for the unusual strength of the late 1990s.

Posted by: kharris on July 2, 2004 11:23 AM

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Is George W. Bush responsible for the fact that the employment situation is lousy? No. The economy is an ocean liner, but the president is not its captain.

Yes he is. And IIRC, in the Navy, if a ship runs aground, regardless of the causes, the captain is automatically relieved of duty.

(Sebastian, we've missed you at Calpun . . . I mean Political Animal. 98% of the right wingers posting there sound like tag team members from the Club for Growth and Limbaugh's old TV show [Zzzzzzzzz]. I know you've got your own blog now and all, but . . .)

Posted by: Thumb on July 2, 2004 11:37 AM

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Sebastian, excellent questions, worthy of serious discussion, to which i can only provide the very first pass of comment.

First, as to the end of the "boom." I think it's overly simplistic to attribute the end of the "boom" to the collapse of tech stocks. The particularly interesting characteristic of this boom was that it was investment-driven (i don't have the numbers handy right now, but the goal of "rubinomics" was to get the bond market to believe that the federal government was serious about ending deficit spending and therefore to remove the "irresponsibility premium" that had plagued the long bond for years, thereby kicking off a private investment-led boom); as a result, the end of the "boom" was pretty much a result of overinvestment. In some cases, that overinvestment was in the tech arena (take a look at telecom), but that's not the entire story.

This is why, until roughly Q3 of last year, we saw very limited new investment by bottom-line driven businesses whose top lines had stopped growing.

Second, you are referencing, when you talk about 15 years ago, the NAIRU (non-accelerating inflation rate of unemployment, or something to that effect - some sharper poster will correct me if i'm wrong). Me? i've thought spending time on that is a fool's errand: the task of macroeconomic policy is to create the best conditions for the field of play and then let the games begin. As the boom showed, it was, indeed, possible to have growth, expanded employment, and non-accelerating inflation, pretty much rendering the idea of NAIRU to the dustbin.

Third, yes, of course it's not fair to compare "normal" conditions with a once-in-a-generation (if not less frequent than that) "boom" condition, but the Prof does specifically discount for that. What's the appropriate discount? Who knows? Some would argue more, some would argue less. I personally think the prof's interest in the employment to population ratio offers pretty good guidance as to what the normative level of jobs should be.

Fourth, we ought to examine a moment why it is that job growth was so slow. The characteristic of the early recovery period from this recession was that businesses didn't have pricing power: their top lines weren't growing. As a result, the only way to improve profitabilty was to squeeze costs, and since the biggest cost for most businesses is labor, squeeze labor costs in particular. This is what led to higher productivity, of course, as fewer workers were producing the same amount of goods and services.

This is why many of us thought that the best form of stimulus would have been a payroll tax holiday of some form, since this would have made each worker in the country cheaper to employ and allowed the market to distribute the gains to the appropriate industries.

There were, of course, other stimulative options available (for instance, tax cuts oriented towards the 80% or so of households who earn less than $80K/annually and who have the highest propensity to spend the marginal dollar of income, thereby providing a demand-push in an economy with an investment-led-boom supply overhang), but as the prof notes, the backbone administration chose not to take advantage of them. Therefore, it certainly seems highly likely that a more stimulative policy would have led to more job creation, regardless of where the bar for the "normative" level of employment should be set.

Or, to put this all in the shortest possible way: it is almost certain that more jobs could have been created with a different policy mix. For that matter, the bush administration view is that more jobs should have been created with its policy mix (5.5M between 7/1/03 and 12/31/04, it told us), so i don't think there's any real debate that we have less jobs than we could have had.

Posted by: howard on July 2, 2004 11:39 AM

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Abh: Real wages have fallen over the past 6 months - at least as measured by BLS's Table B.4 series - average hourly earnings relative to consumer prices (1982 = 100). From $8.30 in Dec. 2003 to $8.21 in May 2004. The nominal wage increase of $0.02 from May to June is likely to be lower in percentage terms than the reported increase in consumer prices, but I don't think BLS has reported the latter just yet.

Posted by: Harold McClure on July 2, 2004 11:44 AM

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Thanks, Harold.

Posted by: Abhishiktananda on July 2, 2004 12:02 PM

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The dot.coms were not all virtual. They had real assets such as employees, office furniture, office space, telecom, routers, CLECs software, etc. associated with them The collapse of the dot.coms also collapsed many of the industries supporting them by halting new orders and flooding the market with a glut of gently used, recent equipment.

You can add to the job loss millions of jobs associated with state spending, including reduced numbers of direct state employees, teachers, policemen, firefighters, contractors working on state sponsored projects in construction, software, social services and the businesses that make a living supporting these workers- restaurants, coffeeshops, office supplies, etc. There is plenty of work that needs to be done, but a shortage of money. Mr. Bush fiscal policy gave more money to the investor class that was already awash with more captial than they could prudently invest and failed to give money to states that were bleeding revenue and forced to cut jobs and projects that made unemployment much worse.

The dot.com associated and state government associated job losses are in addition to all the structural changes that result in fewer manufacturing jobs in the US. If we have excess workforce that is no longer needed to manufacture consumer goods, why not productively employ them building and repairing critical infrastructure? Sure it is cheaper in the short term to send them an unemployment check, but that is an unproductive waste of idle labor.

If Mr Bush had given money to the states to prevent recession related cutbacks, he would not be facing a jobs deficit today.

I like the large screen TV analogy.

Posted by: bakho on July 2, 2004 12:09 PM

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Abhishiktananda wrote, "Wages are stagnant? Econopundit seems to suggest that none of this is true. Someone please advise."

I advise: econopundit is a right-wing hack.

Posted by: liberal on July 2, 2004 12:15 PM

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Headroom! Sounds so benign. Indeed that headroom is the point of these policies not an unfortunate byproduct. This reflects the fact that capital is favored over labor. Lords and Serfs. So the lords and ladies need more servants. Big fucking deal.

Posted by: SW on July 2, 2004 12:33 PM

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bakho: "The dot.com associated and state government associated job losses are in addition to all the structural changes that result in fewer manufacturing jobs in the US. If we have excess workforce that is no longer needed to manufacture consumer goods, why not productively employ them building and repairing critical infrastructure?"

That assumes that the job skills required are comparible. Few of those losing dot.com jobs at least will have the skills to operate heavy machinery, pour concrete, etc. This is both a strength and weakness of a modern economy -- more jobs require complex skills that make the workers more productive, but if demand for a particular set of skills decreases sharply, there's a bigger dislocation. As someone noted in another thread, imagine the nightmare for a 55-year-old whose chosen career disappears.

Posted by: Michael Cain on July 2, 2004 12:57 PM

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It would be interesting to see if there is a correlation between short run periods where middle and low income people and small businesses have received a stimulus and the periodic better than average employment news. Seems like there may be. For example the tax rebates during the summer, and the March-June period where there were anticipated and then received income tax refunds.

I think some of the macro-finance mavens who post on this site have sort of suggested this is the case. I remember one wonky type last summer saying that the little bump in employment was due to rebates, but there was not enough domestic demand to make any difference in the long run. Another agreed, and used the term "dead cat bounce"

Evil Bushies, kicking dead cats around like that!

And even non-macro me remarked a couple of months ago that job destruction was up (ie, layoffs were up), so if the continued very poor job creation stats continued, there would be a dip in employment stats.

So if there is merit to these ideas, we might be bumping around between 150 to 250K the rest of the year, and will have to strain to avoid a net job loss by Jan 2005.

Anyone have to comment on that? I suggest congress cook up another tax rebate real quick in order to see consistent results better than 300 K a month.

By the way, since a lot of mainstream macro people warned that exactly this kind of thing would happen with the Bush tax cuts at the beginning of his admin, I think we can say this is one situation where it is his fault.

Posted by: jml on July 2, 2004 01:06 PM

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Thanks for the outline howard. I should mention that I'm not really attributing all of the decline to the tech-bubble bursting--at least not in a direct sense.

Thumb, I typically don't post at Political Animal because the comments sections are too vast to really attempt a discussion. Furthermore, even my more middle-of-the-road ideas attract ten jeers for every interesting response there--heaven help me on the more controversial topics.

I don't understand the economic sense of the payroll tax 'holiday'. Is this for the individual portion, the corporate portion, or both? In neither case do I see it leading to jobs much differently than a more investor-oriented tax cut because if it is temporary there won't be new hires based on the cuts, and if it is permanent you get all the same deficit problems that we now have. I'm sure I'm missing some steps. But are they material steps?

Posted by: Sebastian Holsclaw on July 2, 2004 01:38 PM

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"he only used half the money to buy insurance, and spent the rest buying his friends large flat-screen TVs."

For $2000? He must not have a lot of friends.

Posted by: Bernard Yomtov on July 2, 2004 01:58 PM

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Sebastian re:

Warning, I'm not an economist. But I do have a good mathematics/statistics background.

You weapons are far superior to ours. We surrender.

( OK maybe only me. Will you accept the following handicap: typing only with your nose? That, hopefully will explain the gap that we'll see when I post this next to yours.)

Posted by: calmo on July 2, 2004 02:48 PM

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Sebastian, you're asking all the right questions today! I hope my answers are half as good....

In the broad sense, what is the point of stimulus? After all, you can't keep "stimulating" forever; sooner or later, the economy has to pick things up on its "own," especially if you believe, as i do, that the federal budget should be in balance over the full business cycle.

Supply-siders will tell you (true supply-siders, that is, honest supply siders) that by increasing the incentives to work and invest by lowering marginal tax rates at the top, you can achieve a kind of permanent stimulus because the incentives are permanent, but honest supply siders also acknowledge that for their approach to work, you have to cut government spending as well, about the difficulties of which i refer you to Reagan, Ronald, presidency of.

For the rest of us, stimulus is what you do to kick-start the economy faster than it would on its "own," in the hopes that things become self-sustaining. That's why true "stimulus" packages are short-term in nature; if they don't "work," you either extend the stimulus, sing the SOL Blues, or come up with a new theory (hence, the origin of supply-side thinking!).

There are, crudely, 3 ways to achieve stimulus: a.) lower income tax rates. This puts more money in consumers' pockets, and by and large they will spend it, increasing demand, leading to more hiring, blah, blah, blah. As i noted in my earlier comment, the more that such cuts are skewed to consumers with household income below $80K, the likelier it is that the money will be spent rapidly (note that i include rebates in this category); b.) make it easier/cheaper for businesses to retain earnings and/or invest, by lowering the corporate tax rate and/or providing various kinds of investment tax breaks (in fact, the backbone administration did do this); the problem, of course, is that regardless how cheap investment is, if a given business doesn't see a good likelihood of ROI, it won't make the investment; c.) make labor cheaper, encouraging hiring, of which the most direct method would be (we've never tried it, of course, so this is entirely theoretical) a payroll tax holiday.

A payroll tax holiday does a couple things simultaneously: it puts more money directly in consumer's pockets, skewed to household below $80K in earnings; it makes it cheaper for companies to hire (to answer your direct question, my version of a payroll tax holiday would include both the individual and the corporate match); and it frees up corporate cash flow for investment purposes.

Now, perhaps individuals would just save the extra money; perhaps businesses would reason that this is a temporary holiday and so still not hire; perhaps again reasoning that it is a temporary holiday, businesses wouldn't use their freed up cash flow for investment purposes. I can't say, because we have no past performance to make any guesses from.

But i believe that all 3 of these considerations would come to pass, that we'd get a little more consumer spending, a little more hiring, and a little more investment, which, combined, would kick start things....

Posted by: howard on July 2, 2004 03:00 PM

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The report indicates the economy is not improving as rapidly a previously thought.

The index of Aggregate hours worked fell by 0.6 percent. This June number implies that there has been essentially no change in aggregate hours worked by employees since March 2004 and since 2002. Aggregate hours worked in manufacturing rose only 0.2 percent since March 2004. Aggregate hours in manufacturing are still more than 5% below their level in 2002 (Table B-5).

Recent Job growth is barely keeping pace with population growth. The HH survey's employment population ratio was above 64 percent in 1998, 1999 and 2000. It fell to 62.3 in 2003 and that is also it's level in June 2004. The unemployment rate has been constant since January 2004. (Table A-1) Just to get back to an E/P ratio of 64%, the economy would need to add 3,780,000 jobs.

From May to June 2004, The seasonally adjusted Weekly earnings of non-supervisory workers fell by $2.45 or about 0.5 percent (table B-3). This decline in nominal weekly wages came on top of a 0.2 to 0.4 percent rise in the cost of living. There is no disconnect between workers perceptions and the "reality" of an improving economy. Workers real weekly earnings fell by nearly one percent in June 2004. Their pay check's buying power is declining.

Hours worked per week by non-supervisory workers has declined over the last year. Combined with the decline in the inflation adjusted hourly wage, the result is a declining pay check in real terms.The stability of aggregate hours worked since March implies that the increase in employment since March was accomplished by cutting back on the weekly hours of existing workers..

Occupations that are most subject to foreign competition and off shoring are still suffering despite the large reduction in the value of the dollar that should have improved the competitiveness of American workers. Household survey data implies that Employment of production workers fell 4.4% from June 2003 to June 2004 and office and administrative support occupations employment fell by 0.7 percent. Fast growing occupational categories were Construction (6%), Transportation and materials moving occupations (5.4%) and Installation and maintenance and repair occupations (3.5%). These are types of work that must be performed in the US (Table A-10).

The occupational up skilling of the employed work force has slowed. During the last year up skilling stopped. Over the last two decades professional, technical and managerial jobs (which account for 34 percent of all jobs) have accounted for about two-thirds of job growth. During the last 12 months, these high skill occupations accounted for only 22 percent of net job growth (Table A-10). Their share of total employment fell.

Industry payroll data from the establishment survey are consistent with this picture. Over the past 12 months, The fast growing industries were mining (2.9%), construction (2.8%), Janitorial services (3.4%), Temporary help agencies (10.3%), education and health services (2.1%) and Hotels and restaurants (2.4%). The Declining industries were manufacturing (-1.0%) and information and communications (-0.5%).

College grads have suffered along with everyone else. The employment to population ratio of college graduates was above 77 percent in 2000 and the first two quarters of 2001. The seasonally adjusted Emp/Pop for college grads had fallen to 75.3% in April 2004, 75.2% in May 2004 and 75.7% in June 2004. The E/P average for the second quarter of 2004 is 3.2 percent below its level in the first quarter of 2001. If we were to return to the first quarter of 2001 college grad E/P ratio, 1,250,000 extra college graduate would be employed. That is roughly equal to the number of bachelors degrees annually awarded by the nation's colleges and universities (Table A-4)
JOHN

Posted by: John H. Bishop on July 2, 2004 03:10 PM

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Michael Cain "That assumes that the job skills required are comparible. Few of those losing dot.com jobs at least will have the skills to operate heavy machinery, pour concrete, etc."

Good Point. But these same workers do have the job skills required to get additional government services and records online, to set up and manage networks for the K12 system, help the counties computerize their record keeping, setting up GPS data basis for surveying, utilities location, programming controls for automating sewage and water functions, etc. Why send them small check to stay home and watch soap operas when we could send them a slightly larger check and receive something of value?

Posted by: bakho on July 2, 2004 03:18 PM

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bakho asks "Why send them small check to stay home and watch soap operas when we could send them a slightly larger check and receive something of value?"

In a number of cases (and I'm only saying this in reference to the most recent recession, although it might be more widely applicable), because they wouldn't accept a job for just "a slightly larger check." A lot of people came out of the late 90's thinking they were enough of God's gift to employers that they would not accept a job a less than 5-10 times what unemployment pays. Eventually, expectations align more closely with reality, but "eventually" is too late to prevent a recession.

Posted by: Tom on July 2, 2004 03:35 PM

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Would consumption have only provided a temporary bump? Does the difference between what would and would not have happened with the president's tax cuts really come down to a disagreement about philosophy?

That's the impression that I got - that consumption would only be increased for a little bit, and then fall back, and that utilizing the multiplier ideas was better - when talking to a PhD student a few months ago in a bar with some friends. Then again, while not drunk, this was after I had a few, so perhaps I am just not describing this accurately.

Posted by: Brian on July 2, 2004 04:01 PM

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Brian, it's not just a matter of "philosophy."

After all, we aren't without evidence, and the evidence is if it's stimulus you want, you don't put the bulk of the money in the hands of people who will be slow to use it.

Now, maybe stimulus is a bad idea. Maybe we should just focus on riding out the recessionary ill affects with the system's stabilizers and not try and "stimulate." That's a philosophical question....

Posted by: howard on July 2, 2004 04:28 PM

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Bishop & Bakko look at what your data you quote.
Essentially, both of you are saying the sectors with no significant international competition are growing. I know to a certain extent I am sounding like a broken record. But I still beleive that the main reason we are suffering economic stagnation is the impact of the international economy. In essence, most of the economic stimulous is leaked abroad and that is the primary reason the tax cuts are not working. Moreover, the main reason that the international leakage is so large is the government deficit. It is basic, that the current account deficit has to equal the domestic savings-investment gap. In an economy with inadequate savings an increased deficit has to be finance with a foreign capital inflows. Consequently, the federal deficit is largely offset by an increased current account deficit so you get no keysenian multiplier. That is why employment is so weak and real wages are stagnating. We are doing a great job of stimulating the Asian economies but a very poor job of stimulat ing the US economy.

Note that the economy started to recover last year until imports and the current account deficit started soaring early this year and the economy started to slow again.

Posted by: spencer on July 2, 2004 04:47 PM

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Thus when the Bush administration says that without the Bush tax cuts employment would be 1.4 million lower, they are probably right. But what they are not saying is that employment would be another 1.4 million higher had Bush administration fiscal policy been designed with its primary focus on boosting employment rather than providing tax cuts for the $200,000+ a year crowd.


Thank you Thank you Thank you

The tax cut program had an opportunity cost of about 1.4 million jobs which means that a less ideologically motivated president (think Gore or Kerry) would likely have finished his term with more jobs than he started with rather than fewer.

Just the kind of statistics we need in our battle against evil.

Posted by: anon on July 2, 2004 04:57 PM

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I agree Spencer. The investment economy is global. Giving money to the investor class is no guarantee that the money will be spent in this country. Treasury has issued about $850 billion in new debt since 2001. This is far more money sucked out of the economy than Bush has put back in with his tax cuts so far.

Posted by: bakho on July 2, 2004 07:34 PM

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Brad: please use the following as the source of another installment of your why can't we have a better media series:

Friday morning USA Today's story on the job numbers had the following headline: "Jobs report likely to undercut Kerry on key economic issue"

http://www.usatoday.com/news/politicselections/nation/president/2004-07-01-kerry-job-growth_x.htm

The article explained in the first paragraph, "The U.S. Labor Department is expected to announce a fourth straight month of strong jobs growth Friday, the latest in a series of positive economic reports that are making it increasingly difficult for Democratic presidential candidate John Kerry to call President Bush's stewardship of the economy a failure."

Sometime in the last 24 hours they did a complete 360 and now the updated article says the exact opposite. Now, the headline reads, "Job growth slows sharply in June" and now they come to the diametrically opposite conclusion on the effect this wil have on the presidential race, "the unexpectedly steep slowdown last month may make it harder for President Bush to campaign for re-election in November on a claim of accelerating economic momentum."

http://www.usatoday.com/money/economy/employment/2004-07-02-jobs_x.htm

God uur media sucks ass.

Posted by: The Wild-Eyed Fool on July 3, 2004 05:58 AM

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bakho: "But these same workers do have the job skills required to get additional government services and records online, to set up and manage networks for the K12 system, help the counties computerize their record keeping, setting up GPS data basis for surveying, utilities location, programming controls for automating sewage and water functions, etc. Why send them small check to stay home and watch soap operas when we could send them a slightly larger check and receive something of value?"

I would argue that the main difficulty in attempting this is that the IT-like work is not day-work or piece-work. You can't walk in to a project that you know nothing about and write meaningful code for it today. Or sit down and debug code today that someone else wrote yesterday and neither one of you had any real idea of the overall project and where that code fits. The project can't have a schedule -- you don't know when you will have qualified workers or when they will be available (have to give them time to search for a "real" job). The costs to the local government of constantly bringing such workers "up to speed" so that they can contribute are very real. Or an even worse example, the local schools acquire a sophisticated network during a time when a large number of the "right" people are unemployed, but it falls apart because they can't afford to buy maintenance services at market rates if the free labor pool disappears.

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